Embattled US satellite/terrestrial venture LightSquared has announced a long-awaited 15-year infrastructure sharing agreement with local telco Sprint Nextel worth US$13.5bn.
The deal includes spectrum hosting and network services, 4G wholesale, and 3G…
Embattled US satellite/terrestrial venture LightSquared has announced a long-awaited 15-year infrastructure sharing agreement with local telco Sprint Nextel worth US$13.5bn.
The deal includes spectrum hosting and network services, 4G wholesale, and 3G roaming, aimed at enabling LightSquared to complete its LTE deployment one year ahead of the FCC mandate to cover 260 million Americans by 2015.
Under the agreement, which is subject to LightSquared resolving its GPS interference issues, the venture plans to pay Sprint US$9bn in cash during an 11-year period for spectrum hosting and network services. It will also grant the group so-called LTE and satellite purchase credits, which the venture estimates are worth around US$4.5bn in total.
“LightSquared will pay cash and 4G LTE credits to Sprint during both the build-out and operating phases of the agreement, which are established on a fixed fee per tower basis,” a LightSquared spokesman explained.
“Sprint, as its option, can elect to redeem 4G LTE credits to purchase 4G LTE capacity during the term of the arrangement assuming Sprint elects to incorporate 4G LTE as part of its 4G offerings to subscribers … When Sprint gets an LTE credit from LightSquared, they automatically receive credit for satellite usage.”
As well as accelerating its terrestrial deployment, LightSquared estimates the agreement will allow the venture to save more than US$13bn in network capital and operating expenses over the next eight years, compared with the cost of a standalone network build.
LightSquared chairman and CEO Sanjiv Ahuja said: “This agreement gives LightSquared a rapid and cost-effective radio access network build.
“With our next generation satellite already operational and our independent core network build underway, LightSquared is now well positioned to meet the fast-growing market demand for wireless broadband services with its wholesale-only integrated 4G-LTE and satellite network.”
Steve Elfman, president of Network Operations and Wholesale for Sprint, commented: “In addition to improving our cash flow, [the deal] provides additional options and flexibility in how we meet our customers’ future capacity needs.”
Jonathan Chaplin, an analyst at Credit Suisse, said today that LightSquared would need to demonstrate that it has at least 20MHz of usable spectrum for the deal to go ahead.
He estimated that LightSquared still needed to raise US$3bn in additional funding.
Chaplin also commented on the WiMAX wholesaler Clearwire, in which Sprint has a 54% stake.
“We would stress that we do not view LightSquared as an alternative to Clearwire for Sprint. The LightSquared infrastructure hosting deal could be value accretive; however Clearwire is still Sprint’s best option for 4G capacity,” he said.
Chaplin expects that the FCC decision on LightSquared’s spectrum will come after mid-August.
Sprint also released its Q2 results today.
These showed a net loss of US$847m for the quarter, but also an increase of 1.1m total net wireless subscribers.
